Spill-over effect of India cotton trade on labour and household income

Abstract

India is one of the world’s largest producers and exporters of cotton, the major raw material for the textile industry, employing more than 4.5 crore people in the country. The present study aimed to analyse the impact of adverse trade in Indian cotton sector on labor and household income by employing Social Analysis Matrix based multiplier model and partial equilibrium model. Indian textile sector has strong backward linkages with primary input multiplier and household income multiplier of 4.13 and 3.44, respectively and, thus transmitting external impacts to the labour and household income. The sector has a higher multiplier effect of 10.17 on production activities, of which the impact on the cotton sector is 0.126. Fall in export and domestic demand for clothing and apparel in addition to movement restrictions around the world during the period 2020-2021, disrupted cotton supply chain and consequent fall in demand and price of the commodity. Simulations for the increase in carry-over stock and reduction in domestic consumption and cotton exports revealed that limiting the commodity's production and supply would retain the market equilibrium and increase the domestic price to the advantage of the farmers. The study reveals that dynamics in the Indian cotton sector trade significantly impacted labour and household income. Appropriate planning for areas under cotton cultivation and alternate procurement mechanisms during emergency situations would stabilise the Indian cotton economy.